Liquid Debt Funds
2022, September, 13
Debt Funds which invest in low-maturity period (upto 1 year) debt from reputed sources and offer quick redemption (within 1 working day) are Liquid Debt Funds.
Types:
Invests in debt which is going to mature next day. Default risk is very low.
Invests in debt which is going to mature within the next 91 days. Default risk is low. Returns offered are better than bank's saving account interest. Some mutual fund houses offer instant redemption (within 30 minutes) on all days. This makes Liquid funds suitable for parking part of emergency funds.
Invests in debt which is going to mature within the next 1 year. Default risk is moderate. Returns offered are few percent higher than bank's savings account interest. There is exit penalty if withdrawan before 7 days. Redemption could take 1 working day. Suitable for parking surplus funds or money that is not going to be invested for few days. These funds are sometimes also referred to as savings funds.